If a Country Experienced Deflation, Then

question 4

Multiple Choice

If a country experienced deflation, then

• A) the nominal interest rate would be greater than the real interest rate.
• B) the real interest rate would be greater than the nominal interest rate.
• C) the real interest rate would equal the nominal interest rate.
• D) nominal GDP would be greater than the money supply.

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid.

Operating Activities

Business activities that relate directly to the production, sale, and delivery of a company's products or services, generating revenue.

Cash Dividends

Payments made by a corporation to its shareholders out of its profits or reserves in the form of cash.

Direct Method

An accounting approach for preparing the cash flow statement where operating cash receipts and payments are listed directly.